Strategic Solutions

Another “Pay-As-You-Go” concept. Such a system does not create savings, which means when inflation and or interest rates are above zero, money is essentially lost. With our demographic upheaval of worker to retiree ratios, it became a Ponzi Scheme. Someone is left holding the bag when the cash runs out; as things stand, that means everyone under 50.

When Social Security starts paying out more than it takes in, whether it be 2012, 2015, or a few years later, the system will be running a deficit in real terms because the trust is virtual. If you put $10,000 in the bank, take it all out for some home repair and maybe a few weekends in Vegas, that money is gone, IOU or no. If you write an IOU to yourself to replace that ten-grand, and you stick to your word, you still have to come up with the money somewhere…that original 10k, again, is already gone. The Social Security Ponzi Scheme thus was a not-so-elaborate method of shoveling trillions of dollars into the mouths of politicians and out onto their pet projects…original intention aside.

Where did those payroll taxes go? Who knows? Could be to Star Wars funding, Farm Subsidies, Tax Cuts, Tomahawk Missiles, appropriations within the infamous Black Budget…the possibilities are as vast and spooky as Karl Rove’s imagination. We are left with the government’s promise that the trust exists. Granted, if the government defaulted on a promise like this, there would be revolution in the streets and in the retirement towers. The people wouldn’t stand for it. At best, if tens of millions of seniors and near-retirees feel shafted, and these folks tend to vote, our next batch of leaders will make Ted Kennedy look like an arch conservative, which would mean financial ruin in a permanent way. Uncle Sam will, one way or another, make good on those trust fund promises until 2042, but he’ll either have to raise trillions in taxes or trillions in more debt to make it so.

Smart Strategy

At this point, we should all agree that there is a problem. Yes?

There is no one solution for saving and strengthening Social Security. Wise tinkering and incremental changes should be cobbled together for the effect we want, which again, is a stronger and safer public pensions system. Fixing Social Security requires a holistic approach, and both sides of the partisan isle will need to honestly address some tough questions, check their sacks, and then swallow some potentially bitter medicine.

Trivia: Lou Pearlman ( former Backstreet Boys and N Sync Manager / Producer) was part of this illegal business.